With modified sizes to effective success
Hello dear ATAS team,
First of all, thank you for your innovative ideas. With ATAS you have created a platform that allows professional traders an unlimited number of filter settings to achieve their goals. Of course there are also some bugs, but you immediately try to fix these bugs. Today I would like to present you an idea that will show many ATAS traders the exact turning points in the chart in the future.
A market is determined by supply and demand and the price moves because the market sell orders (point A) run into the limit buy orders (point B) and the market buy orders (point C) run into the limit sell orders (point D). The iceberg orders are hidden behind the limit orders and can, if necessary, be pushed by the big player algorithms to absorb further market orders. These facts are well known. The first level of limit buy orders in the DoM represents the best bid. The first level of limit sell orders in the DoM represents the best ask. The spread lies between the best ask and the best bid. This spread changes if no further limit orders are added after a current price. This creates small or larger gaps, which in most cases are not visible because they take place inside a candle. In the bid and ask area, there are different movements that must be considered separately. If point A is stronger than point B, the market sell orders break through the limit buy orders and if point C is weaker than point B, the market buy orders are absorbed and stopped by the limit sell orders. I have described these different strengths in more detail here:
Which is stronger, market orders or limit orders?
With the help of the different filter settings from ATAS, I was able to color-code these strengths.
The strength of the market orders is easy to identify, but the strength of the limit orders is not. The sizes you listed in the Times and Sales list have a special ability to display the strength of limit orders. However, the view of the sizes in the Times and Sales list must be optimized. Here is an example from 07/02/2020 from the Euro FX.
Equilibrium (Point A) was formed over a period of 30 minutes. A horizontal limit delta was formed in this equilibrium, where a higher number of limit sell orders were displayed (point B). The vertical limit delta also shows a higher volume of limit sell orders (point C). From this it could be concluded that the price will continue to go down. The problem is getting the right time to not be stopped. At point E we can see in the sizes that on the best ask side, higher than average numbers appear than on the best bid side. The numbers best bid / best ask show the limit orders still available in the DoM after each trade. In this case, smaller iceberg orders were pushed in on the sell limit side, which held up all market buy orders. After that, the price went down 16 ticks (point D). With the presentation of the current sizes you can hardly identify that, because the numbers run down very quickly.
With the help of a small graphic with bar display (Point A) it clearer. One can immediately see that the limit sell side is holding the market orders, after that, the price is running in the opposite direction (point B).
In the ATAS DoM I calculated the respective equilibrium from the sizes (blue fields) (Point A). At Point B you can see my suggestion to better highlight the sizes. In this case, the maximum size of the bars was limited to 100. One should be able to set this size yourself, as numbers over 100 can also occur. In the area of the sizes there should also be the possibility to separate Best Bid and Best Ask from each other (Point C and D). This is crucial if you have Ask and Bid displayed separately in the Times and Sales list. In addition, there should be the option of expanding the field of sizes to show the display even more precisely. I also recommend a color filter setting to highlight certain values in the area of the sizes.
The display of a bar graph in the area of the sizes brings enormous advantages in the identification of trend reversals. You can immediately see when strong limit orders are holding the market orders at multiple price levels. In addition, you can see the strength of both limit sides at all times. Absorptions at different price levels can be identified even faster. The sizes enable other interesting aspects, such as the specific identification of iceberg orders. I also have a few ideas that make it easier for us traders to get an overview. The big players have a clear advantage over retail traders thanks to their iceberg orders. According to a study, 70% of iceberg orders are between 10-20 lots in size and are used permanently. These iceberg orders can be identified with the right tools. The stock exchange data is available for this, we just have to make it visible.
The DoM can also be filtered in order to obtain even more precise information about the iceberg orders. In this example you can see my modified DoM. I will be happy to publish further ideas if necessary. I hope that my idea of sizes gets some likes from the ATAS Traders, so that we can pinpoint the trend reversals in the future.
Best regards Michael
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